Fewer high street firms? So what?

19 August 2010

Posted by Neil Rose, Editor, Legal Futures

Shut down: does it matter if there are fewer high street firms?

The survey earlier this week from LawyerLocator uncovered a good deal of pessimism among sole practitioners about their future once alternative business structures (ABSs) come into being (see story). Though the survey – like another one earlier this year by Jures (see story) – also highlighted some positives for those practices willing to take on the challenges of new competition, the conventional wisdom is that this is not a good time to be in a small high street firm, made substantially worse by the recent goings-on in legal aid and firms not receiving contracts.

Here’s a controversial and brutal thought for you: so what?

There is an assumption that the network of high street law firms is a good thing, mainly in facilitating access to justice (which is one of the core principles underpinning the new regulatory regime overseen by the Legal Services Board). This is rarely questioned. But significantly it is an assumption the LSB does not buy into. Board chairman David Edmonds has told me that if there were fewer law firms on the high street – or even just one – but a better service to the public was on offer, then there should be no problem. Access to justice is not measured simply by quantity.

Dianne Hayter (now Baroness Hayter of Kentish Town, it should be noted), who chairs the Legal Services Consumer Panel, says much the same – the key for her is accessibility, not the number of doors. A single legal practice in a very accessible location (like one of the new NHS polyclinics) might be better for the public than a series of far less accessible firms.

Clearly this is broad brush – in some fields of law (such as divorce) there must be multiple providers to advise all sides of a matter, but do there need to be as many as there are now? We already know the Legal Services Commission’s answer to that question.

And then there is the reality of default by small firms – as we reported recently, the Solicitors Compensation Fund is currently dealing with £157 million worth of claims arising from default by sole practitioners and two-to-four partner firms (see story). Also it is almost exclusively firms in those categories that the Solicitors Regulation Authority shuts down, at great cost, while they make up most of the practices in the assigned risks pool as well.

These figures do not tell the whole story – indemnity insurance picks up the default tab where there is an innocent partner, which obviously becomes more likely the larger the firm, and so it is nearly inconceivable that a big firm could call on the fund. Further, the SRA is less likely to shut down a 15-partner firm where just one has gone rotten, but that doesn’t mean there aren’t problems in firms of all sizes, even the big boys in the City.

But even allowing for this, fewer small firms would reduce the cost of default that the whole profession has to bear through insurance premiums, compensation fund contributions and generally the cost of running the SRA. Big is not necessarily better but, whether we like it or not, it is the way the legal profession is going, whether to take advantage of supposed economies of scale or to have the financial muscle to invest in systems and compete.

Then there is clients’ desire to meet their solicitor face to face. Surveys continue to show this is a factor in choosing lawyers, but already plenty of legal services – most notably conveyancing and personal injury – are dealt with remotely from the client and there has been no sign of massive consumer unrest (although, of course, they often don’t have much choice in the matter). I suspect this desire is in part a throwback to the old days of putting on a suit to consult the family solicitor, a meeting that would consist of much forelock tugging by a grateful client. The Internet, and the next generation of clients used to handling their affairs online, may not consider this such a priority.

Though there are some cases where face-to-face advice and reassurance is inevitable – such as post-divorce contact arrangements, to take one random example – as legal services are often a distress purchase, anything that makes dealing with their case easier and more painless is likely to appeal to the average consumer.

We all decry the death of the high street, with local butchers, fishmongers and so on a dying breed, but we tend to do so while in the car to our local out-of-town hypermarket or as we log on to order our groceries online. But just as there are examples of local butchers who continue to thrive and compete by offering something unique and binding themselves into the fabric of their community, so there are high street law firms which have done the same. They provide a service that a commoditised provider based on some remote industrial estate never can. They deserve to survive, and in all likelihood will do so. But that will not happen simply by right of being part of the fabled high street network.

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